The Mauritius Trust Act 2001 is based on the English common law trust model and provides for the setting up of private trusts (whether discretionary or fixed interest), charitable trusts, non-charitable purpose trusts (which must be certain, reasonable and lawful) and commercial trusts (eg. pension and employee benefit trusts).
We would recommend that the appropriate tax and legal advice be taken by the clients in respect of their tax position in their country of residence / domicile before establishing a Mauritius Trust. The tax implications of establishing a trust vary with individual circumstances; hence, it is important for each individual to seek professional advice in order to clarify their own tax position before proceeding.
WHO CAN SET UP MAURITIUS OFFSHORE TRUSTS
Any non-Mauritius resident adult who have capacity and have assets to settle. This may be in the form of corporate.
KEY FEATURES OF MAURITIUS OFFSHORE TRUST
- Settlor and Beneficiaries are not residents of Mauritius during the life of the trust.
- None of the Trust assets are Mauritius real estate.
- At least one trustee is resident in Mauritius (the trustee can be an individual, a Mauritius offshore management company duly authorized by the Mauritius Financial Services Commission or an offshore bank in Mauritius).
- All Trusts are limited to a maximum perpetuity period of 99 years, except for charitable trusts, which may be of perpetual duration, and non-charitable purpose trusts, which are limited to 25 years.
- Trusts are deemed to be irrevocable.
- Confidentiality is one of the features under the Trust Act. Trustees are not required to disclose any confidential information to any person not legally entitled to it.
- Trust can be set up without the Settlor being mentioned in the trust deed.
- The beneficiary has to be identifiable by name or ascertainable by reference to a class.
- There is no disclosure requirement in respect of name of the Settlor or Beneficiaries. Details of Settlor or Beneficiaries are not disclosed to any authorities but a confirmation by the Trustee that the Settlor and Beneficiaries are non-residents in Mauritius during the life of the trust must be made to Commissioner of Income Tax.
- A Protector of the Trust may be appointed.
- Guidance from the Settlor may be given to the Trustees via Letters of Wishes.
- Possible to migrate trusts from other jurisdictions if permitted under the laws under which the Trust was set up.
TAXATION OF MAURITIUS OFFSHORE TRUSTS
One of the primary reasons for using a Mauritius offshore trust is for tax purposes. A Mauritius offshore trust may either elect to be a resident trust or a non-resident trust for tax purposes; both types have their advantages and which to choose will depend on the primary objectives of the trust.
- Non-Resident Trusts
A Mauritius offshore trust which elects to be treated as non-resident for income tax purposes pays no income tax on income derived outside Mauritius. However, non-resident trusts do not benefit from Mauritius’ network of double tax agreements (“DTA”). A non-resident trust will be appropriate where income of the trust is to be accumulated eg. in a family trust. This type of trust may also be the preferred vehicle in structured finance transactions where the trust will typically be a special purpose trust set up to hold shares in a special purpose vehicle. A non-resident trust is exempt from tax and filing requirements in Mauritius, as it consist of are non-resident beneficiaries.
- Resident Trusts
A resident trust, licensed as a Category 1 Global Business, is taxable in Mauritius on its chargeable income. The effective rate of income tax is 3.0%. Chargeable income which is subject to tax is defined as the difference between (a) the net income derived by the trust; and (b) the aggregate amount distributed to the beneficiaries under the terms of the trust deed.Non-resident beneficiaries of an offshore trust are exempt from income tax in Mauritius on the income derived from the trust; the Mauritius resident trust can effectively pay no income tax by distributing all its income to its non-resident beneficiaries.The main advantage of a resident trust is its accessibility to the DTA. A number of DTAs to which Mauritius is a party now specifically include "trust" in the definition of "person" eligible to benefit from the DTA.
Mauritius has no capital gains tax on disposal of shares (other than shares of a company holding immovable property in Mauritius). On distribution made to beneficiaries, there are is withholding tax in Mauritius.
- Asset protection.
- Wealth management and Tax planning.
- Succession planning.
- Avoiding probate.
- No mandatory registration requirement of the trust deed, thus confidentiality of the terms of the trust is guaranteed.
- Possibility of avoiding forced heirship rules usually in force in Civil law jurisdictions.
- Settlor of an offshore trust can also be a beneficiary, but he/she cannot be the sole beneficiary of the trust of which he/she is the settlor.
- The settlor of an offshore trust can also be a trustee, provided that at least one trustee is a qualified trustee resident in Mauritius.
- The trust property can be any tangible or intangible property, such as shares and stocks, bank accounts, insurance policies and most other assets can be settled onto the trust.
- The trust concept is recognised in most Common law countries and is being increasingly accepted in major Civil law countries also.